Minister of Finance Joseph Lyu (呂桔誠) stressed yesterday that the ministry would continue to push forward the proposed tax reform on consumption, but declined to confirm whether value-added tax (VAT) will be hiked this year as scheduled.
Complementary measures are required for this mid-term reform as the Cabinet decided in 2003 to cancel commodity taxes on rubber tires, drinks, plate glass and electric appliances, as well as abolishing stamp and entertainment taxes, he said.
To make up for tax-revenue losses, the Cabinet's financial reform committee suggested raising VAT by one to two percentage points from its current level of 5 percent.
Statistics from the ministry showed that raising VAT by one percentage point would rake in an extra NT$40 billion (US$1.2 billion) of tax revenue. However, manufacturers would be expected to transfer the extra burden onto consumers by raising commodity prices.
Former finance minister Lin Chuan (
But Lyu remained cautious yesterday.
"First of all we need to discuss, seek advice, map out draft plans and communicate with the legislature and the public to drum up support for a decision," he said at a press conference. "Whether VAT will be hiked later this year depends on progress in the legislature."
Hiking VAT only requires an administrative decree, while tax laws must be amended before abolishing commodity, stamp and entertainment taxes.
"Such amendments would be passed, at the earliest, at the end of the next legislative session [in December]," Lyu continued.
This means the possibility of hiking VAT during this year is quite slim although the minister refused to confirm any details.
While the ministry is busy studying the best time to implement tax reform, the Ministry of Economic Affairs is mulling whether to negotiate with the finance ministry, hoping that the 10 percent tax on the "undistributed surplus earnings" of companies can be waived.
Minister of Economic Affairs Morgan Hwang (黃營杉) said on Tuesday that as the newly implemented alternative minimum tax (AMT) scheme will impose a tax rate of between 10 and 12 percent on companies' annual earnings surpassing the NT$2 million (US$61,800) tax-free threshold, levying taxes on their undistributed surplus earnings at the same time could lead to concerns of double taxation, according to local Chinese-language reports yesterday.
He said that if the government cannot reform such unreasonable taxation policies there would be little incentive to help lure industries to increase their investments in Taiwan.
He promised to communicate with the finance ministry on behalf of the industrial sector and strive for their rights, the report said.
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